Correlation Between Airbnb and Expedia

Can any of the company-specific risk be diversified away by investing in both Airbnb and Expedia at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Airbnb and Expedia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Airbnb Inc and Expedia Group, you can compare the effects of market volatilities on Airbnb and Expedia and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Airbnb with a short position of Expedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbnb and Expedia.

Diversification Opportunities for Airbnb and Expedia

0.74

Correlation Coefficient

Airbnb  Expedia

Poor diversification

The 3 months correlation between Airbnb and Expedia is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Airbnb Inc and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group and Airbnb is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Airbnb Inc are associated (or correlated) with Expedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expedia Group has no effect on the direction of Airbnb i.e., Airbnb and Expedia go up and down completely randomly.

Pair Corralation between Airbnb and Expedia

Given the investment horizon of 90 days Airbnb is expected to generate 1.68 times less return on investment than Expedia. But when comparing it to its historical volatility, Airbnb Inc is 1.03 times less risky than Expedia. It trades about 0.04 of its potential returns per unit of risk. Expedia Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18,462  in Expedia Group on November 28, 2024 and sell it today you would earn a total of  1,514  from holding Expedia Group or generate 8.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Airbnb Inc  vs.  Expedia Group

Airbnb Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Airbnb Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Airbnb may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Expedia Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Expedia may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Airbnb and Expedia

The main advantage of trading using opposite Airbnb and Expedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airbnb position performs unexpectedly, Expedia can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Expedia will offset losses from the drop in Expedia's long position.

The idea behind Airbnb Inc and Expedia Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.